Apple may finally bring out the big guns

Opinion: An improved iPhone and a possible watch would reset expectations

By

MichaelComeau

MarketWatch photo illustration

Morgan Stanley this week raised its target price on Apple’s stock by 11% to $110.

The really big news is analyst Katy Huberty’s expectations for the much-rumored iWatch.

She expects Apple
AAPL, +0.62%
to sell 30 million to 60 million units in its first 12 months on sale at an average price of $300. That’s an assumed $9 billion to $18 billion in sales, or $13.5 billion at the midpoint.

Tim Cook in April said Apple is “closer than it’s ever been” to introducing a new product category, but there’s no telling what that actually is or when it’s coming. Heck, it could be the television set that many people (including me) expected two years ago.

But let’s assume for the sake of argument that the iWatch actually exists and is destined for release soon. After all, Apple did just hire Patrick Pruniaux, vice president of global sales & retail of LVMH’s Tag Heuer watch unit.

The new Google
GOOG, +0.77%
Android smartwatches from Samsung and LG have been underwhelming, though Motorola’s upcoming Moto 360 may do better.

Can Apple improve on existing smartwatches? It’s a tricky situation.

For all of Apple’s design prowess, remember that the iPod, iPhone and iPad were all closely related products with similar form factors. One product readily transitioned to the next.

The transition to an iWatch seems much trickier because it requires a shift to a completely new paradigm with an unknown and possibly major dork factor. There are also technological hurdles to overcome, like the need for long battery life and the creation of an all-new interface.

Does the hiring of Pruniaux help Apple crack the code of making a cool smartwatch for the masses?

Not yet, because he was just hired. If Apple is indeed launching a smartphone this year, or any new product category for that matter, then it will have been in the works for years — possibly back to the Steve Jobs days.

The sales potential of a big-screen iPhone 6 is huge, but I’d consider the iWatch a wait-and-see situation. If it exists, of course.

At this point, optimistic estimates for an iWatch are actually detrimental, because expectations are already building courtesy of the iPhone 6, which is universally expected to drive a major upgrade cycle. It would be far better for investors to remain wary until we see what we’re dealing with.

And that leads us to another rumor: The big-screen iPhone 6 will be delayed until 2015 due to production issues. If true, we’re going to see a major “sell” reaction to the official iPhone 6 announcement, which would probably make for a good buying opportunity.

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